The COVID-19 pandemic certainly scrambled the airline industry, though in ways many investors may not have considered. Passenger demand obviously plunged. After an all-time high of 927 million US passengers in 2019, 2020 figures dropped 60% to 369 million before rebounding to 674 million US passengers in 2021, according to the US Bureau of Transportation statistics. The effects of COVID-19 on the cargo industry tell a different story, with North American cargo shipments actually increasing 4.5% in 2020 over the previous year. The less people traveled, the more they bought and had delivered.
Everything is on the upswing now, and airlines large and small are poised to reap the benefits. One new, smaller airline of interest is Global Crossing Airlines Group, Inc. (NEO: JET; JET.B) (OTCQB: JETMF), more commonly known as GlobalX. GlobalX saw an opportunity amidst the pandemic to build a nimble, adaptable service in the passenger charter and air cargo markets. The company’s business plan requires a low capital investment and is positioned to grow right along with the rising demand for its services. Let’s take a look at what GlobalX has right now, its plans for growth, and the opportunity being presented to potential investors.
GlobalX History to Date
GlobalX is a very new airline. It had no revenue in 2020 as it spent a good portion of that year and about half the next getting certified. The company began flight operations in August, 2021. Starting an airline is by no means a simple endeavor, from both an operational and regulatory point of view. GlobalX was able to get certified as a US 121 flag carrier in about one year’s time. The flag status means GlobalX enjoys preferential rights or privileges accorded by the US government for international operations.
“We certified GlobalX as a US 121 Flag carrier during the pandemic, accomplishing this in 12 months,” said Ed Wegel, Chairman and CEO of GlobalX. “During our first year of operations which was from August to December, we operated 730 revenue flights, and approximately 1,700 block hours, for nearly two dozen customers.”
“I am very excited by the scope and scale of operations achieved since initiating revenue service. Besides successfully launching our ad-hoc charter business, we have flown for tour operators, college sports teams and fans, and established multiple long-running program charter and ACMI relationships. In short, we have been executing the business plan we laid out when we first started Global Crossing.”
The initial business is focused on charter flights. GlobalX uses Airbus A320 aircraft and currently has a stable of 6 aircraft at its disposal. The plan is to get 13 aircraft active by Q4 2022. The company generally leases aircraft to keep the capital expenditure comparatively low, and as a result of the pandemic found low cost opportunities to acquire aircraft. The company’s lease-based model greatly reduces the risk of buying aircraft outright and allows GlobalX tremendous flexibility in tailoring its fleet to changing market conditions. GlobalX also has an effective, streamlined training program to get pilots and flight attendants quickly and continuously up to speed to match its projected growth.
Revenue, Growth, and Cargo
For the FY 2021 reporting period, revenue was generated from August through December. It has been a quick ramp, and further steep growth is expected for 2022 and beyond. August and September brought in just over $3 million, while the last quarter of 2021 produced just over $11 million in revenue. GlobalX expects to see Q1 ‘22 revenue exceed the $14.3 million total from FY ‘21, and is looking to average 30% sequential quarterly revenue growth throughout 2022. GlobalX expects to reach profitability by Q3 ‘22, which would be an impressive feat considering revenue operations began in Q3 ‘21.
The company is currently involved in the FAA certification process for its cargo business. The charter and cargo businesses complement each other, with pilots able to fly on both sides of the operation, training facilities appropriate for both, and an already lean operation supporting each equally. GlobalX anticipates commencing cargo operations in Q4 2022.
Overall, GlobalX is looking to have 50 aircraft operating by the end of 2025. As a point of reference, Sun Country Airlines offers a mix of scheduled service, passenger charter, and cargo services with its fleet of 43 planes. Its current market capitalization is in the neighborhood of $1.5 billion. Other companies in the space, like Air Transport Services Group and Atlas Air Worldwide, have been trading near all time highs prior to a very recent, Ukraine-related market dip. If GlobalX is able to ramp as expected, and growth in the overall passenger and cargo markets continues as expected, its current market capitalization of approximately $60 million will look like a pittance.
The Upshot
Overall, GlobalX is an upcoming company operating in a high demand market. Its business model is relatively de-risked as rising costs, including fuel, are passed on to the customers and capital expenditures on equipment are limited by leasing aircraft. Steep revenue growth is expected both over the shorter and longer terms, and profitability is anticipated by the end of the company’s first year of revenue operations. There is much more to cover with this company, so keep an eye on this space for more information.
